Payment protection insurance (PPI) complaints are on course to more than double the record number already predicted for this year, the ombudsman service has said.
The Financial Ombudsman Service (FOS) has already received nearly 100,000 PPI complaints in the first six months of this financial year and warned that consumers would only face longer waits for justice if banks failed to clear up complaints quickly and fairly.
The flood of complaints to the ombudsman has also shown a dramatic increase, with 66,882 new complaints made about PPI between July and September, more than double the 32,445 complaints received in the first quarter of this year.
A spokesman for the FOS said that with 1,500 new complaints a day and well over 3,000 new telephone inquiries a day as well, it looked "likely" that the ombudsman would see more than double the 165,000 cases that it had originally anticipated.
The service said it had built enough flexibility in its budget to sort out far more cases than the original estimate, but even so, this left the watchdog tackling much higher complaint volumes.
Natalie Ceeney, chief ombudsman, said: "The mis-sale of PPI is by far the biggest mis-selling scandal we've ever seen.
"As the banks face up to record levels of complaints, the ombudsman has geared up to deal with the ever-increasing fallout that consumers are facing.
"But with the ombudsman receiving 100,000 PPI complaints in the last six months alone, it's clear that unless the banks sort out their complaints quickly and fairly, consumers will only face longer waits for justice."
Around £10 billion has been set aside by the banks to cover claims being made by people who were sold insurance they did not want or need, but some consumer groups have raised concerns that even this could not be enough to cover the scale of the problem.
PPI policies were meant to help people pay back their loans after a loss of income, but a widespread mis-selling scandal emerged, with some people finding they had taken out the insurance without realising it or felt under pressure to do so.
The FOS previously criticised banks and insurers for subjecting customers to "delays and inconvenience", despite a legal challenge to PPI complaints being dropped last year.
Some 68% of these complaints were upheld by the ombudsman service in consumers' favour in the latest quarter, a similar level to the 69% upheld between April and June.
The average compensation payout is £2,750, although the figure can vary considerably.
The ombudsman service has received a total of 450,000 complaints from people about PPI since 2001.
It said that in the last financial year, only a very small proportion (2.5%) of PPI complaints turned out to be bogus, where no policy had ever existed, and these cases were largely brought by claims management companies (CMCs), which typically take a quarter of any payout.
It also said that in around one quarter of all the cases it saw where banks told the ombudsman that no PPI policy ever existed, the ombudsman later found out that it did.
Figures released last month by the City watchdog showed a similar surge in PPI complaints made to financial services firms in recent months.
There were more than 2.2 million PPI complaints in the first half of this year, the Financial Services Authority (FSA) said previously, the highest six-monthly figure it has ever recorded.
Consumer group Which? has been leading a Big Change campaign to later banks' culture.
Which? chief executive Peter Vicary-Smith said: "The banks must set aside more money for PPI claims and make it easier for customers to get back what they are rightly owed, without any hassle.
"Consumers are continually being short-changed by the banks. We're campaigning for Big Change in the culture of banking to put customers first, not bankers and protect the public suffering from further mis-selling and scandals."